Why analytics driven companies outperform their peers

1. White paper
IBM Software Group Business Analytics software
Better Business Outcomes
with Business Analytics
Why analytics-driven companies outperform their peers

2. 2 Better Business Outcomes with Business Analytics
The need for better business outcomes
The responsibility of managers and knowledge workers is to
deliver better business outcomes: higher revenue, lower costs,
reduced risk, accurate predictions.
On the surface these outcomes aren’t new; they’ve been core
concerns since money first changed hands.
But if these outcomes have stayed the same, nearly everything
else has changed. Organizations must now achieve them within
a fierce and unforgiving economic environment unlike anything
anyone has ever seen.
The new economic reality
This environment is substantially more volatile, less certain and
more complex than in years past. Events, threats and
opportunities don’t just emerge more quickly or with less
predictability; they are converging and influencing each other
to create entirely unique situations. The effects of this new
reality have been dramatic, disruptive and swift. They have left
no industry, company or individual worker unaffected.
The pressure is on
“Nearly eight out of ten CEOs anticipate
significant complexity ahead,but fewer than
half feel prepared to handle it.”– IBM 2010
Global CEO Study
Because of these disruptions, executives have discovered that
the assumptions and methods they relied on are no longer
sustainable nor competitive. Those that dug in their heels and
held fast to a business model that worked well even a few years
ago are seeing their competitive advantage, customer loyalty
and profit margins eroded—if not obliterated—by the
accelerating barrage of changes coming from all directions.
For the individual knowledge worker, never before has the
pressure to optimize business outcomes been greater; never
before has their need for business insights been more acute.
Knowledge workers must now draw, share and act on insights
from all points on the time spectrum, from historical trends to
current results to predictions for future performance.
For organizations to optimize outcomes in this new
environment, they must become smarter. Specifically,
executives must make smarter decisions about strategy.
Managers must make smarter decisions about resources and
tactics. Individual employees must make smarter decisions
about where to focus their energy and time. Further, decisions
and their subsequent actions must be made, carried out,
evaluated and optimized more quickly than ever before.
The way to better decisions is through better business
insights. And the way to better business insights is through
business analytics.
Why business analytics?
Business analytics have emerged in recent years as a strategic
priority throughout the c-suite. The reason is simple: they
drive better business outcomes.
Business analytics deliver insights for better
decisions
Business analytics deliver actionable insights into every aspect
of business performance, whether this means current results,
customer trends, competitive threats or market opportunities.
For example, when, for its 2010 Global CIO Survey, IBM
asked more than 2,500 CIOs from 78 countries, 19 industries
and organizations of all sizes to identify one or more of their

3. Business Analytics software 3
visionary plans for enhancing their competitiveness, 83
percent answered “business intelligence and analytics.”1
Business analytics can also increase the efficiency and
effectiveness of core business processes and contribute to the
creation of high-performing “analytics-driven” organizations.
These advantages are borne out by other, equally large and
equally global IBM surveys. Consider these findings from the
2010 IBM Global CEO and CFO studies, respectively:
• Business analytics improve business strategy and decision-
making. “Standout” CEOs - those who perform well in both
good and bad economic conditions - are 16 percent more
likely than other CEOs to use iterative strategic planning
processes than formal annual reviews. They are also 54
percent more likely to favor quick decisions, despite pervasive
economic ambiguity.2
• Business analytics drive consistently better financial results.
High-performing CFOs can anticipate double-digit gains
across revenue growth, EBITDA and return on invested
capital. These “Value Integrators” apply more forward-
looking insights across the enterprise, from strategic planning
to operational optimization and use them to manage risk,
reduce costs and spot new opportunities. 3
“With the appropriate analytical capabilities
spanning process,technology and talent,
Finance can turn today’s wealth of financial
and operational information into business
insights and contribute to significant
enterprise value creation.”– IBM 2010 Global
Chief Financial Officer Study
1
The New Voice of the CIO: Insights from the Global Chief Information Officer Study, IBM Global Business Services, 2009, page 15.
2
Capitalizing on Complexity: Insights from the Global Chief Executive Officer Study Executive Summary, IBM Global Business Services, 2010, page 4.
3
The New Value Integrator: Insights from the Global Chief Financial Officer Study. IBM Global Business Services, 2010, page 3.
Business analytics are most effective when deployed to answer
three key questions:
• How are we doing?
• Why?
• What should we be doing?
With clear answers to these questions, employees at every level
of an organization can make better decisions about strategy,
resources and tactics. They can contribute to a common store
of insights that are shared over divisions and departments. And
they can take more effective actions to drive better outcomes.
The analytics-driven organization
Organizations that deploy business analytics also effect longer-
lasting improvements in their decision-making culture: these
organizations become “analytics-driven.” In achieving this state,
they can draw, share and act on business insights to overcome
long-standing, sometimes entrenched barriers to better
business outcomes. These include:
• Obstructed views. Employees fail to seize the full potential of
an opportunity because they see only a portion of the
information they need to understand results and make
confident decisions.
• Rigid structures and processes. Employees are unable to
make decisions or act on information, even if they can see
emerging opportunities or threats.
• Distractions. A misalignment of tactics with goals or
competing priorities diverts energy and resources toward what
matters to executives.
• Fragmentation. Competing cultures and conflicting
accountabilities dilute organizational effectiveness.
Information silos prevent a complete, consistent view of results
and lead to sub-optimal decisions.

4. 4 Better Business Outcomes with Business Analytics
• Reactive cultures. Employees respond too slowly to
opportunities and threats, ceding market share and growth
opportunities to more agile competitors.
Analytics-driven companies, in comparison, base decisions and
actions not on gut feel or fear, but on insights drawn from a
rigorous and ongoing analysis of what works and what doesn’t.
Individual performance, decision effectiveness and core
business processes can be quantified, analyzed and optimized,
with outcomes fed back into a feedback loop for continuous
improvement. Further, analytics-driven companies excel at
sharing these insights more broadly across teams and functions
to create a rich and ever-growing body of knowledge. In doing
so they are building a commonly shared store of information
and insights to fill the holes in their corporate memory.
As a result, analytics-driven companies exhibit smarter, more
effective business behaviors. In place of the typical barriers to
better business outcomes, employees in these organizations are:
• Aware. Complete and immediately accessible insights into
performance help employees understand whether and why
performance is on or off-track.
• Focused. Relevant, personalized insights help employees
understand the strategy and goals so they can prioritize their
decisions and actions.
• Aligned. Consistent and commonly shared insights help
employees direct their energies and resources toward the
actions that drive better outcomes.
• Agile. Timely insights help employees respond immediately
and coherently to emerging opportunities and threats through
better decisions and actions.
• Proactive culture. Forward-looking information helps
employees identify problems and resolve them before they
hurt performance.
Why IBM Business Analytics?
“Where once we inferred,now we know.
Where once we interpolated and
extrapolated,now we can determine.The
historical is giving way to the real-time,
and even the predictive.”– Sam Palmisano,
IBM Chairman and CEO
Through acquisitions and organic growth, IBM has
created a powerful, innovative and effective business
analytics solution. In the past five years, we have:
• Invested more than $14 billion (including the acquisitions
of Cognos and SPSS) in software to build the industry’s
most robust portfolio
• Created the Business Analytics and Optimization service
line of our Global Business Services® division and staffed
it with more than 7,000 dedicated consultants
• Opened eight analytics Centers of Excellence around the
world to help clients uncover insights hidden in their data
The core components of IBM business analytics software
include:
• Business Intelligence. Query, reporting, analysis,
scorecards and dashboards to enable decision-makers
across the organization to easily find, analyze and share
the information they need to improve decision-making

5. Business Analytics software 5
• Predictive and Advanced Analytics. Data mining, predictive
modeling, ‘what if’ simulation, statistics and text analytics to
identify meaningful patterns and correlations in data sets to
predict future events and assess the attractiveness of various
courses of action
• Financial Performance and Strategy Management.
Budgeting and planning, financial consolidation,
scorecarding and strategy management, financial analytics
and related reporting capabilities to manage risk and help
simplify, structure and automate dynamic and sustainable
financial performance and strategy management practices
• Governance Risk and Compliance. Financial controls
management, operational risk management, IT risk and
compliance, vendor risk management and internal audit
management for an aggregated, enterprise-wide picture of all
exposures that helps CFOs and CIOs understand how these
risks can impact the organization’s future performance
• Analytic Applications. Applications with ready-made
reporting and analysis that measure performance for a
specific business domain such as customer, workforce, supply
chain or financial performance management
Underpinning this software is a set of core attributes and
offerings unique to IBM.
Complete capabilities
IBM offers the complete range of business analytics
capabilities to fully anticipate and shape business outcomes.
These encompass:
• Reports, scorecards and dashboards that enable a deep
understanding of past, real-time and future performance
• “What-if” scenario and predictive modeling capabilities that
help identify the ideal course of action
• Enterprise planning, budgeting and forecasting capabilities to
align resources for better business outcomes.
Standout capabilities include:
• Fully integrated predictive analytics
• “What-if” scenario modeling capabilities, powered by a 64-bit,
in-memory OLAP engine that supports write-back
• Fully adaptable packaged analytics
A proven platform
The IBM business analytics platform ensures that our clients
can maximize productivity from both their business users and
IT teams. The IBM business platform is easy to deploy and
manage, with capabilities that simultaneously reduce the IT
burden and increase business user satisfaction. The IBM
platform is special because:
• Its independent, service-oriented architecture fits easily into
your existing IT infrastructure.
• It helps clients build a foundation of trusted information built
on rich IBM capabilities for data warehousing, data quality,
data cleansing, integration and more.
Unmatched industry and departmental expertise
IBM offers extensive proven practices, accelerators and fully
adaptable analytic applications for key analytic processes such
as finance, risk, fraud, supply chain/operations, customer
analytics and human capital management, across key industries.
In addition, we enable the creation of “champion” communities
within the IBM Innovation Center for Business Analytics,
Customer and Partner Advisory Boards, IBM Research,
business analytics workshops and more.

6. 6 Better Business Outcomes with Business Analytics
Building the analytics-driven organization
With its combination of software, hardware and consulting
expertise, IBM is driving the creation of analytics-driven
organizations in every industry, around the world.
Unlike their peers, these organizations not only drive better
business outcomes, they anticipate and shape them as well. For
example, these organizations can:
• Detect patterns to stop crime before it happens. Through
real-time crime data, geo-spatial mapping and more accurate
risk assessments, police departments across North America are
making more efficient use of both financial and human
resources, closing more cases more quickly and increasing
officer safety.
• Anticipate demand and match it to supply. Through
predictive analytics, retail chains in Europe can rapidly predict
and manage stock replenishments based on the variations in
demand and sales from store to store. Further, they can
connect their core systems for immediate end-to-end
monitoring and adjustment of their supply chain.
• Increase agility to respond to opportunities. With the
power to analyze a staggering 30 million data records in
seconds, major logistics companies benefit from an immediate
(and immediately clear) overview of results. Managers can
identify cost drivers to optimize production processes, cut
operating costs and deliver a precise view of contribution
margins.
Independent ROI studies by analyst firms including Nucleus
Research confirm the business benefits of IBM business
analytics as both measurable and dramatic. For example:
• Using improved forecasting and reporting, Blue Mountain
Resorts was able to reduce labor costs and excess inventory
for a one-month ROI of more than 1,800 percent.
• Using predictive analytics and increased visibility into
real-time crime information, the Memphis Police
Department was able to reduce crime rates without
increasing its staff for a three-month ROI of 863 percent and
average annual benefit of $7.2 million.
• By standardizing its financial close process, Huntsman
Corporation was able to reduce audit fees and increase
productivity for a five-week ROI of more than 1,000 percent.
• By increasing employee access to sales, inventory and
accounts receivable (AR) data, U.S. Lumber improved
productivity, reduced inventory levels, accelerated AR
turnover and reduced capital costs for an 11-day ROI of more
than 3,600 percent.
IBM Cognos 10: Unleash intelligence
The latest innovation in the IBM business analytics software
solution and the first of many to come, IBM Cognos 10 will
change how organizations make decisions, allocate resources,
predict and plan the future.
IBM Cognos 10 revolutionizes how organizations use business
intelligence by freeing people to think, connect with others
and infuse insights into everything people do:

7. Business Analytics software 7
• Freedom to think: Cognos 10 delivers a revolutionary user
experience that supports the way users think, so they no
longer need to interrupt their train of thought to fit the
software. It does this through a new BI workspace that
delivers greater power, intuitive navigation and a cleaner look.
• Connect with others: Cognos 10 delivers built-in
collaboration and social networking to fuel the exchange of
ideas and knowledge that naturally occurs in the decision-
making process, but that is also trapped within meeting notes,
manual processes, emails and people’s notebooks. It does this
by enabling users to form communities, capture annotations
and opinions and share insights with others around the
information itself. The new Cognos 10 collaboration and
social networking fuels decision excellence and builds a
corporate memory to capitalize on in the future. With built-in
collaboration and social networking, Cognos 10 harnesses the
collective intelligence of the organization to connect people
and insights and gain alignment.
• Simply do: Cognos 10 delivers mobile BI, real-time BI and
BI mashups to transform BI from an activity apart from users’
everyday work to BI a very natural and essential part of
everything they do. It does this by delivering interactive
analytics to frontline workers and people on the road, and by
extending the power of BI for use by more people and more
user communities than ever before.
• Built on a proven technology platform: Cognos 10 is
designed to upgrade seamlessly and to cost-effectively scale
for the broadest of deployments. It provides business users
and IT alike the freedom to see more, do more—and make
the smarter decisions that drive better business results.
Summary
Business analytics is the means by which organizations optimize
business outcomes. Using insights that can be accessed, shared
and acted on by employees at every level, organizations can
increase profits, reduce costs, manage risk and make more
accurate predictions to prepare for future outcomes. With its
unique combination of software, hardware and consulting
services, IBM provides the industry’s most powerful, effective
and innovative business analytics solution, enabling thousands
of organizations to anticipate and shape business outcomes.
With IBM Cognos 10, IBM continues its rich history of
industry vision and product innovation to help our clients
survive – and thrive – in the next decade of smart.
About IBM Business Analytics
IBM Business Analytics software delivers complete, consistent
and accurate information that decision-makers trust to improve
business performance. A comprehensive portfolio of business
intelligence, advanced analytics, financial performance and
strategy management and analytic applications gives you clear,
immediate and actionable insights into current performance
and the ability to predict future outcomes.
Combined with rich industry solutions, proven practices and
professional services, organizations of every size can drive the
highest IT productivity and deliver better results.

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October 2010
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